Economic Analysis of the Digital Economy

Avi Goldfarb, Shane M. Greenstein, and Catherine E. Tucker

Abstract

The rapid decline in the cost of storage, computation, and transmission of data has changed how firms operate and has altered the kinds of products and goods being sold. Increasingly, economic activity is digital. This volume aims to set an agenda for future research in the economics of digitization. Each chapter identifies a promising area of research related to the rise of digital technology, touching topics in areas such as the economics of internet infrastructure, leisure time, search, prediction, labor markets, and advertising. Research on the economics of digitization is distinguished by ... More

The rapid decline in the cost of storage, computation, and transmission of data has changed how firms operate and has altered the kinds of products and goods being sold. Increasingly, economic activity is digital. This volume aims to set an agenda for future research in the economics of digitization. Each chapter identifies a promising area of research related to the rise of digital technology, touching topics in areas such as the economics of internet infrastructure, leisure time, search, prediction, labor markets, and advertising. Research on the economics of digitization is distinguished by an emphasis on how digital technology interacts with market outcomes. Digital technologies have some features that suggest that many well-studied economic models may not apply. For example, digital products and services have very low marginal costs of production and distribution and consequently a far greater variety of such goods are available. While such features do not require fundamentally new economic models, they do require more than simply taking theoretical and empirical results from other markets and assuming the implications will be the same. The volume highlights that many public policies that were developed for the offline world seem poorly adapted to digital markets. This has implications in policy debates in areas such as copyright, security, privacy, and antitrust.

Joel Waldfogel

Susan Athey and Scott Stern

End Matter

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